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Japanese pharma major Eisai said that the move by the Government to impose Minimum Alternate Tax on Special Economic Zones will jeopardise their investments in India.
The company, which has invested $50 million to set up a manufacturing unit in Visakhapatnam, is now rethinking its expansion plans.
“We wanted to expand the Indian facility substantially but now there are question marks,” Simon Collier, Director, Government Relations, Eisai Co., Ltd told Business Line .
Less attractive
“Our concern is that the environment based on which we made our investments has deteriorated in the last year or so,” he said.
Effective April 1, 2011, the exemption from MAT has been withdrawn. As a consequence, SEZ units will have to pay out MAT of 18.5 per cent plus surcharge and education cess on their book profits, which, for accounting purposes, is approximately 20 per cent. The Visakhapatnam plant is central to Eisai’s efforts to supply its off-patent medicines at affordable prices to patients in India as well as across the developing world.
The unit focuses on active pharmaceutical ingredients (APIs) and employs around 200 personnel, including 30 researchers.
The company also supplies 2.2 billion tablets of diethylcarbamazine, an anti-filariasis drug manufactured at this plant, free of charge to the World Health Organisation (WHO).
“The strategic value of this plant for Eisai global is to make it the manufacturing centre for non-patent products. But the tax environment has damaged the economics and trust in the Indian Government, so some investments may not happen to the same extent as we want,” Collier said.
Collateral damage
Eisai has manufacturing facilities in China and Taiwan and, according to Collier, the additional tax could come in the way of future investment decisions into India.
“Vizag is still competitive but less competitive. But obviously we don’t have unlimited investment funds and so when the board decides on the next investment plan, then economics will come into the picture,” Collier said.
The Finance Ministry had introduced the MAT based on complaints that companies with SEZ and non-SEZ units were manipulating the benefit.
Eisai reckons it has become collateral damage in the process.
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